When a man affirmatively canceled his life insurance policy before his death, the carrier prevailed over his heirs’ claim for benefits.
Background
Paige Reynolds, Caroline Reynolds, and Alison Reynolds filed this lawsuit challenging USAA Life Insurance Company’s disallowance of proceeds from John Paul Reynolds’ life insurance policy. The USAA asserts that it was not required to pay out the proceeds of the insured’s life insurance policy because he effectively terminated the policy before his death.
Plaintiffs argue that the policy’s grace period was still in effect at the time of the insured’s death because he did not validly terminate the policy. The court is seized of cross motions for summary judgment.
Plaintiff’s Arguments
The plaintiffs argue that because the policy is “ambiguous” as to the due date of the premium, any doubt must be resolved in favor of the insured. The court concludes that there is no doubt or ambiguity to be resolved in favor of the insured, as the policy very clearly indicates when the premium due date began.
The policy defines “effective date” as “the date coverage begins”. The “effective date” of the policy was November 4, 2010. The definition of “effective date” of the policy further explains that “[p]repayment due dates, policy months, years and anniversaries are calculated from this date. Therefore, the court concludes that there is no ambiguity to construe against the USAA, as the police unambiguously identify that the USAA calculated the due date of the premium in question here as August 4, 2020. .
Alternatively, plaintiffs argue that notwithstanding any ambiguity in the policy provisions, Virginia statutory law requires that the premium due date in this case be calculated as August 3, 2020, not August 4, 2020. The Theory of plaintiffs is based on Virginia Code § 38.2-3302, which states “[e]Each individual life insurance policy must include a clause that all premiums after the first premium are payable in advance.
According to the plaintiffs, the wording of the law “shall be payable in advance” requires that the premium due date be calculated as August 3. Otherwise, the plaintiffs argue that an August 4 bonus due date would clearly violate the law. Additionally, plaintiffs argue that because Virginia Code § 38.2-3303 also states that ”
The court finds plaintiffs’ interpretation of Virginia Code §§ 38.2-3302 and 38.2-3303 unconvincing and concludes that the plain language of the law does not require monthly premiums to be paid before their due dates.
USAA arguments
USAA’s main contention is that the policy proceeds were not due because the insured and USAA mutually agreed to cancel the policy between themselves prior to the premium due date and the start of the grace period. Thus, even though the court found that the termination provisions of the policy were the only way to void the policy, the parties still had the authority under Virginia law to orally and mutually agree to void the policy. police.
Conversely, the plaintiffs argue that the cancellation of the policy was not given adequate consideration and should therefore be cancelled. Additionally, because the USAA and the insured did not know “the actual premium due date for the policy or that the grace period had already begun at the time of the cancellation”, plaintiffs argue that there was no consensus when the insured contacted USAA to cancel the policy.
Essentially, the plaintiffs argue that there was a mutual mistake of fact and therefore the annulment should be reversed. The court finds that none of the plaintiffs’ arguments are persuasive or constitute a correct interpretation of the law, and that the insured and the USAA validly canceled the policy between themselves.
The court agrees with USAA that the parties exchanged mutual promises which constitute valid consideration: USAA agreed to terminate the policy of the insured at his request and to cease assuming the risk of the policy, and the insured would stop paying monthly premiums. The mutual exchange of promises is sufficient consideration.
With respect to the plaintiffs’ claim that the annulment should be set aside as a mutual mistake of fact, the defendant submits that there was simply no mutual mistake of fact and that the annulment correctly embodies the intentions of the parties. The court agrees with the USAA.
Plaintiffs’ motion for summary judgment dismissed. Defendant’s motion for summary judgment granted.
Reynolds v. USAA Life Insurance Company, Case No. 3:22-cv-577, June 22, 2023. EDVA in Richmond (Hudson). VLW 023-3-359. 19p.
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